The Mercenary Owners, They Are a Changin’ (Sort of)

May 3, 2010

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Blackwater and DynCorp, the two leading mercenary firms servicing the US wars in Iraq and Afghanistan have both undertaken steps toward significant structural changes over the past month. In the case of DynCorp, the ownership of the whole business seems to be changing hands, while Blackwater is dumping its private air force.

Cerberus Capital Management, one of the largest private equity firms in the US announced April 12 it was buying DynCorp, the massive, publicly traded company, which is akin to the Wal-Mart of the private security industry, for $1 billion in cash. Cerberus counts among its big wigs former vice president Dan Quayle, who often represents the company internationally. DynCorp has had its share of scandals over the years, including whistleblower allegations that personnel have engaged in organized sex-slave trading with girls as young as 12 and allegations its personnel have assaulted journalists. It has been rebuked by the State Department for its "aggressive behavior" in interactions with European diplomats, NATO forces and journalists in Afghanistan. A 2007 US government audit of DynCorp’s work in Iraq found that the State Department "does not know specifically what it received for most of the $1.2 billion in expenditures under its DynCorp contract for the Iraqi Police Training Program." More recently, the company was in the news facing allegations its training of the Afghan National Police was shoddy, including allegations its trainees didn’t know how to adjust the sights on their AK-47s. If the Cerberus deal goes through, it will mean that the publicly-traded DynCorp will go private, meaning that it will be infinitely more difficult to get information on the company.

Cerberus seems to have had a dream of owning its own mercenary business for at least a few years. In April 2008, the company was reportedly looking to buy Blackwater. The deal apparently fell through because of concerns over Blackwater’s reputation.

For over a year, Blackwater has tried to act like it is under new ownership. It isn’t. Erik Prince remains its sole owner. The company has tried to change its name, creating alter egos such as Xe Services and US Training Center. It even went so far as to create an apparent shell company, Paravant, in an effort to trick the government into giving it more contracts in Afghanistan, according to Senate Armed Services Committee Chair Carl Levin. Paravant is also the "company" whose personnel reportedly signed out hundreds of weapons in Iraq under the name of the popular South Park character Eric Cartman. In January, two Paravant operatives were arrested by the FBI on charges they murdered Afghan civilians.

While Prince technically stepped down as CEO and many of his original cronies have fled or been relieved of their duties (five, including former Blackwater president Gary Jackson, are facing federal weapons charges), Blackwater is still Blackwater and Prince is very much running the show. But in a sign that Prince may be shifting away from his dream of building a parallel structure to the US military–complete with an army, navy and air force–Prince sold his aviation division, made up of Presidential Airways and Aviation Worldwide Services, for $200 million to AAR Corp.

Prince’s private little air force had roughly 60 planes, many of which were used for US government and military operations in Afghanistan and Central Asia and Africa. For years, the aviation division has found itself in the legal crosshairs. The families of US servicemen killed in Afghanistan in the crash of Blackwater flight 61 sued the company, saying Blackwater’s pilots were reckless, the flight had inadequate equipment and that they should not have flown. AAR seems to have gotten an incredible deal, financially speaking, predicting that it will generate about $175 million of revenue for the company annually. This, coupled with the fact that Blackwater does not seem to be bidding on the new round of massive State Department private security contracts, could be the first real sign that Blackwater is phasing out of, at least, the public, US government-funded mercenary business. Prince’s private CIA, Total Intelligence Solutions, works for many corporations and foreign governments. Sources have also told me that recently Prince transfered some of his Other Government Agency (read:CIA and JSOC) business to companies outside, but trusted by, Prince’s Blackwater empire. Prince, who reportedly ran–and participated in–covert actions for the CIA and JSOC around the world, said recently he wanted to be like Indiana Jones and become a school teacher and perhaps coach wrestling.

Representative Jan Schakowsky, the leading Congressional critic of the mercenary industry, said she was concerned that if DynCorp goes totally private it could hinder oversight activities of its operations going forward. The company remains deeply embedded in US operations, particularly in Afghanistan. DynCorp is bidding on a new massive State Department security contract and beat back protests from Blackwater making it eligible to bid on a lucrative training program in Afghanistan. The company also operates in Pakistan. Schakowsky said the company has a "fairly long history of misconduct."

"We have a hard enough time doing any kind of effective oversight over companies like this," Schakowsky told Reuters. "This just makes it harder."